Posts Tagged ‘POA’

Alaskan Lillie M. Rahm was in her early nineties when she first met handyman Robert Riddell, then in his mid-sixties. Their friendship grew quickly, and Mr. Riddell moved in with Ms. Rahm within a few months. Two years later friends and relatives instituted legal proceedings that lasted well past Ms. Rahm’s death.

When Ms. Rahm revoked a power of attorney naming her daughter as agent and transferred some of her money into a joint bank account with Mr. Riddell, her daughter began to ask questions about her mother’s finances. Ms. Rahm seemed to be confused and Mr. Riddell refused to allow her access to any information, so Ms. Rahm’s daughter filed a conservatorship petition. Four days later Mr. Riddell and Ms. Rahm were married.

That did not stop the legal proceedings, however. After a hearing the public guardian was appointed as Ms. Rahm-Riddell’s conservator. Shortly after that a domestic violence complaint was filed, alleging that Mr. Riddell physically attacked and verbally abused his wife. The public guardian moved her to an assisted living home in Washington; Mr. Riddell found her, removed her from the facility and took her to Oregon to live with him. He refused to reveal her whereabouts despite court orders; Ms. Rahm-Riddell died in Oregon in 1997.

It turned out that Ms. Rahm-Riddell had signed two wills after meeting Mr. Riddell. The first, signed shortly after their meeting, left her home, its contents and one-fourth of the rest of her estate to Mr. Riddell. The second, signed in Oregon just a few months before her death, left her entire estate to Mr. Riddell.

Ms. Rahm-Riddell’s family asked the Alaska courts to admit an earlier will to probate and Mr. Riddell objected. He insisted that the last will she signed was valid, and he demanded a jury trial as to her competence to make the will. Her daughter and brother argued that she was not competent at the time, that Mr. Riddell had unduly influenced her, and that the matter should be tried without a jury.

The Alaska court refused to grant a jury trial and ultimately ruled that only the will signed before Mr. Riddell’s appearance on the scene was valid. Mr. Riddell appealed to the Alaska Supreme Court.

The general rule in Alaska (as it is in Arizona) is that civil matters are decided by the judge unless there is a specific statute or the common law (the rules predating statehood) authorizes a jury. Since will contests were unknown to the common law and no statute permits it, Mr. Riddell’s demand for a jury trial was properly denied. Furthermore, said the Court, the evidence was clear that Ms. Rahm-Riddell could not correctly identify the individual involved in her life at the time the will was executed. Mr. Riddell’s wills were struck down. Riddell v. Edwards, October 5, 2001.

Like many seniors, Robert Anderson signed a financial power of attorney, giving his daughter and son-in-law power to manage his financial affairs. He may have understood that the power of attorney would avoid the necessity of court proceedings to appoint a conservator if he became incapacitated. Having a power of attorney, as it turned out, was not an effective way to avoid court involvement.

At first Mr. Anderson appointed his son Sam as his agent. Mr. Anderson’s estate was large, and so for two years Sam used the power of attorney to make gifts of his father’s property to himself, his sister Barbara, and both his and his sister’s children.

When Sam died unexpectedly, Mr. Anderson signed a new power of attorney. This time he named his daughter Barbara Lasen and her husband Paul as agents. Barbara and Paul continued to make gifts from Mr. Anderson’s property for the next two years—but now Sam’s children were excluded. In addition Barbara and Paul used Mr. Anderson’s residence and vacation home without paying any rent. Nothing in Mr. Anderson’s power of attorney permitted gifts, but Barbara and Paul insisted that they had discussed the gifts with Mr. Anderson and he had agreed.

Sam’s two daughters finally decided that enough was enough, and they filed a conservatorship petition. They asked the court to appoint a local bank to act as Mr. Anderson’s conservator. Barbara and Paul objected, arguing that no conservator was necessary because Mr. Anderson had given them the power of attorney. They also argued that they had priority to act as conservator if the court decided appointment of a conservator was appropriate.

The trial judge decided that Barbara and Paul had overstepped their authority as agents, and appointed a local bank as conservator. Barbara and Paul appealed.

The Nebraska Supreme Court agreed with the lower court. Barbara and Paul did not have the authority to make gifts because there was no specific language in the power of attorney. Once they violated their duties as agents under the power of attorney it was entirely appropriate to appoint an independent conservator to consider what steps to take—including possible action against Barbara and Paul for return of the money they had wrongfully taken from Mr. Anderson. Besides, Barbara and Paul had already shown that they were not trustworthy protectors of Mr. Anderson’s assets. Conservatorship of Anderson, June 22, 2001.

The result would likely have been the same under Arizona law. As in Nebraska, an Arizona agent may not make gifts using a power of attorney unless the authority to do so is clearly spelled out in the document (and, in fact, separately initialed by the principal). Mr. Anderson would almost certainly have had a conservator appointed if he lived in Arizona.

Fae Powell had given her nephew Jackie Powell a power of attorney so that he could handle her financial affairs. Mr. Powell used that power of attorney to change over $600,000 worth of bank CDs into “payable on death” status, naming himself and other nephews and nieces as beneficiaries. Ms. Powell’s will, however, left her estate to her sister and others. Did Mr. Powell have the authority to make those changes in his aunt’s estate plan?

The question posed to the Nebraska courts was actually more complicated than that. In most states it is clear that a power of attorney does not give the agent (sometimes also referred to as the “attorney-in-fact”) authority to make gifts unless there is a specific provision in the document. But is changing accounts so that they pass automatically on death to someone else really a gift? After all, no transfer would occur until after Ms. Powell’s death, so it could be argued that her agent had made no gifts.

Ms. Powell’s situation was further complicated by her nephew’s insistence that she had specifically instructed him to make each change, and that he was simply signing her name to actions she was really directing herself. Of course, it would be difficult for him to prove that she gave him such instructions, unless she did so in the presence of neutral observers.

Ms. Powell’s sister Eleine Hampshire did not believe that Mr. Powell was carrying out the decedent’s instructions. She pointed out that if the changes had not been made she would have inherited nearly $80,000 from Ms. Powell’s estate, and so she sued Mr. Powell for fraud.

The Nebraska Court of Appeals threw Ms. Hampshire’s case out of court. The justices decided that the action should have been brought by Ms. Powell’s estate against her attorney-in-fact, and that Ms. Hampshire could not sue directly for the loss to the estate. Never mind that Mr. Powell was named as personal representative of the estate—that problem would have to be solved by someone seeking to disqualify him from serving in the probate court. Ms. Hampshire had simply filed her lawsuit improperly. Hampshire v. Powell, May 8, 2001.

The Nebraska court’s decision, based as it is on procedural grounds, fails to answer the underlying question: does an agent under a power of attorney have the authority to change beneficiary designations on accounts, life insurance and the like? Other cases have decided the question differently, depending on the individual facts in each instance. It would certainly be better to have the change in beneficiary designations signed by the individual herself, rather than by the agent. In Arizona the law is a little clearer: unless the power of attorney gives express authority to make such changes (and the authority is separately initialed on the form), they are probably invalid.

Maria Isabel Duran was a devout Jehovah’s Witness. The 34-year-old New York woman believed, along with most members of her faith, that the Bible prohibits transfusions of blood or blood products, even when life is threatened.

Ms. Duran also needed a liver transplant operation. Her faith does not teach that organ transplants are prohibited, and so Ms. Duran searched for a medical facility that would recognize her medical and spiritual needs. She learned that the University of Pittsburgh Medical Center had performed transplants on Jehovah’s Witnesses without transfusions.

Knowing that her husband did not share her religious convictions, Ms. Duran took precautions to ensure that she would not receive blood transfusions. She named a friend as her agent for health care decisions, and her health care power of attorney included strong language making her refusal clear. “I absolutely, unequivocally and resolutely refuse homologous blood (another person’s blood) and stored autologous blood (my own stored blood) under any and all circumstances, no matter what my medical condition,” wrote Ms. Duran (the provisions in bold print here were in bold in her original power of attorney).

Immediately after the 1999 transplant Ms. Duran’s body began to reject her new liver, and her condition declined precipitously. She lapsed into a coma, and her health care agent was called upon to consent to a second transplant operation. Before that operation Ms. Duran’s physicians decided that she needed an immediate transfusion.

Presumably realizing that Ms. Duran’s health care agent would refuse permission for a blood transfusion, her husband instead filed an emergency guardianship proceeding with the Pennsylvania courts. An attorney was appointed to represent Ms. Duran, and her physician, husband and sister all testified to the need for a blood transfusion. Her health care agent was not notified about the legal proceeding. After a brief hearing the judge approved transfusions. Ms. Duran’s health care agent objected, but transfusions continued during the ensuing legal maneuvers. Ms. Duran died three weeks later.

Despite the death of Ms. Duran her health care agent pursued an appeal of the order permitting transfusions. Recognizing that the situation could arise again, and that it was important to have some legal resolution of the dispute, the Pennsylvania Superior Court accepted jurisdiction of the case.

That court ruled that the crystal-clear language of Ms. Duran’s health care power of attorney should have been enforced. Furthermore, Ms. Duran’s health care agent was entitled to be notified of the proceedings and defend her wishes in court. Although Ms. Duran did not survive the operation or the legal proceedings, her case reinforces the right of patients to control their own treatment. In Re Duran, February 21, 2001.

Suzanne C. Pruitt died in 1994 from complications related to her Alzheimer’s disease. At the time of her death her estate was worth over $1.4 million. The IRS argued that it should have been $120,000 more than that, and that the estate should pay just under $50,000 more in taxes.

For years before her death Ms. Pruitt had made regular gifts to her children and grandchildren. In 1992, for example, she had given $185,000 to her three children and another $70,000 to grandchildren. The reasons for her generosity were clear: she wanted her offspring to enjoy the money immediately, and she wanted to reduce the size of her estate to limit the amount of tax due at the time of her death.

In 1987, and again in 1992, Ms. Pruitt had given her daughter Sandra Thompson a durable power of attorney to handle her financial matters. As it turned out it was good she had done so, since Ms. Pruitt lost the ability to manage her own affairs by 1993. In that year, Ms. Thompson had to decide whether to continue her mother’s pattern of making gifts of her property.

Using the power of attorney Ms. Thompson did give away some of her mother’s property in 1993, but she only transferred $10,000 each to Ms. Pruitt’s three daughters and their husbands. The next year she did the same thing, and Ms. Pruitt died a month after the last transfers of property.

When the estate tax return was filed, the IRS had no problems with gifts made by Ms. Pruitt herself before 1993. The tax authority did object to gifts made using he power of attorney, however. The agency argued that the powers of attorney did not include express language authorizing Ms. Thompson to give away her mother’s property, and so the gifts were incomplete. Since Ms. Pruitt could theoretically have filed a lawsuit to set aside the gifts and secure a return of the property, they should be included in her estate for tax purposes, insisted the IRS.

Ms. Pruitt’s children disagreed, and appealed to the United States Tax Court. They argued that Oregon law does not require any special language in a power of attorney to authorize gift giving, and that the transfers were effective to reduce Ms. Pruitt’s estate.

The Tax Court was particularly impressed by the history of gifts made by Ms. Pruitt while she was still competent, and the testimony of her attorney that he had advised her to continue to make gifts. The Court ruled that Ms. Pruitt’s estate did not owe the additional tax. Estate of Pruitt v. Commissioner, September 12, 2000.

The Pruitt decision would provide no comfort to an Arizona taxpayer in a similar situation, however. Arizona law is clear: a power of attorney does not authorize gifts unless the power is clearly spelled out and separately initialed by the principal and witnesses.

Lucille Lucareli had three sons: Les Lee, Leigh and Robert. She owned her home in Racine, Wisconsin, and not much else. In 1996 she gave her son Les Lee a durable financial power of attorney, and she also took some steps to plan for the possibility that she might have to move to a nursing home at some point.

The problem facing Ms. Lucareli is a common one. Although she could qualify for Medicaid assistance with her long-term care if she did move to the nursing home, the state would begin to accumulate a claim against her estate. After her death, the state’s claim could prevent her sons from receiving the family home, or at the least could mean that they had to pay off her nursing home costs before the home could be transferred to them.

Ms. Lucareli could qualify for Medicaid assistance while still owning the home, since federal law requires that the state not count the value of the home in determining eligibility. On the other hand, if she gave the home outright she would be ineligible for Medicaid help for up to three years.

Ms. Lucareli decided to take advantage of a popular planning technique: she transferred her home to her sons immediately, but retained the power to change her mind later and exclude one or more sons. She did this by retaining a “power of appointment” over the home, exercisable by a written instrument any time before her death. This approach, she thought, would get the home out of her estate (so Medicaid would not have any claim against it), but not affect her Medicaid eligibility. In Arizona, many practitioners use another similar technique, preparing a deed which retains both a life estate (that is, the power to reside on and use the property for the life of the original owner) and a power of appointment. A similar approach is sometimes referred to as a “Lady Bird” Deed in some states.

There were at least two problems with Ms. Lucareli’s approach. First: she didn’t actually complete the transaction herself; her son Les Lee signed the deed on her behalf using his power of attorney. Second: according to the court decision rendered this week, Wisconsin law does not recognize this type of power of appointment.

A month after the transfer of Ms. Lucareli’s home, she apparently became unhappy with her other two sons. In September, 1997, she signed a document exercising the power of appointment and removing sons Leigh and Robert from the home title, and leaving the home to Les Lee alone. Upon her death Les Lee sued his brothers, asking for a ruling that the property was his alone. The trial court disagreed, holding that the transfer was invalid and the power of appointment meaningless. The Wisconsin Court of Appeals ordered that the property be divided into three equal shares. Lucareli v. Lucareli, May 17, 2000.

The significance of the Lucareli case is broader than the family squabble between brothers. This decision casts doubt on one of the most popular and effective mechanisms for protecting the family home against future nursing home costs. It is not yet known whether the same result will be reached in Arizona or other states.

It has taken three decades to establish, but the notion of patient self-determination is now firmly entrenched in American law. A patient has the right to instruct that life-sustaining medical care be withheld or removed. To protect against future treatment, an individual can execute a living will and/or a health care power of attorney directing that care be withdrawn or withheld in future circumstances. But what happens when care providers treat the patient despite advance directives and against surrogates’ instructions?

Rebecca Jane Taylor was paralyzed on her left side and confined to a wheelchair after a stroke in 1992. She sought to prevent continued life support if she became terminally ill with no reasonable possibility of recovery. She gave her son Steven a health care power of attorney, and she even signed a form directing that a “do not resuscitate” order be placed on her chart at the Woodlands nursing home in Indiana.

In 1995, when Ms. Taylor suffered a second stroke and became comatose, her three sons met, discussed the situation and agreed. Steven Taylor signed the forms directing that his mother receive only intravenous fluids and that no tube feeding be instituted.

Two weeks later Ms. Taylor seemed to be responding to painful stimuli. Her attending physician directed that a nasogastric tube be inserted to provide both food and fluids, and the nursing home tried to contact Ms. Taylor’s sons.

Steven Taylor was at work that morning, and his wife promised he would get back to the nurse shortly. Rather than wait for Steven, the nurse called another one of Ms. Taylor’s sons, told him that his mother’s veins were collapsing and that she would die a terrible “dry death,” and got his consent. Shortly thereafter Steven Taylor contacted the nursing home and refused permission for the nasogastric tube. The attending physician decided he would break the apparent tie and instructed that the tube be inserted.

After Steven Taylor replaced the attending physician (and after the second physician increased Ms. Taylor’s tube feeding without informing family members), Ms. Taylor was moved to another facility. She died peacefully there ten days later, but five months after the Woodlands first violated Steven Taylor’s instructions as agent for his mother.

After her death Ms. Taylor’s estate brought a suit against the Woodlands for “wrongful prolongation of life.” The nursing home asked for dismissal of the suit, arguing that there is no such cause of action. The Indiana Court of Appeals agreed, insisting that Indiana law gave the Taylors their only remedy—they could have gone to court before their mother’s death to order the facility to comply with their instructions, but there was no claim for damages after her death. Estate of Taylor v. Muncie Medical Investors, April 20, 2000.

“Undue influence” is usually thought of in connection with provisions in a will. It can also be cited in attempts to set aside transfers made during life, as a recent North Carolina case illustrates.

In early 1996 Irene J. Stephenson signed a deed conveying her home and sixteen acres of land to the Wake Forest Baptist Church. The deed reserved a “life estate” to Ms. Stephenson—that is, it allowed her to live on the property, rent it and use it as she wished for the rest of her life.

Shortly after she signed the deed, Ms. Stephenson moved to set it aside. She claimed that church members had brought the deed (and an attorney) to the nursing home for her to sign, and that no attempt had been made to involve her family, her attorney or the agent she had named in her durable power of attorney.

Ms. Stephenson had been eighty-seven years old when she signed, and had been living at a local nursing home for two years. Her mental health had allegedly begun to fail. In fact, Ms. Stephenson died before the case could be resolved, and it was continued by her probate estate.

After the complaint was filed, the Wake Forest Baptist Church moved for summary judgment, which was granted. Ms. Stephenson’s estate appealed.

The original complaint had not included a claim that church members unduly influenced Ms. Stephenson to sign the deed. The Court of Appeals directed that the case be returned for a decision on the possibility anyway, and it provided some guidance on what to look for when analyzing a transaction for undue influence. Among the factors the court found might tend to indicate undue influence in this or another transaction:

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“Old age” and mental weakness of the signer

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Change from prior disposition of the property

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Benefits flowing to a non-relative

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Involvement of the beneficiary in procuring the transfer

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Disinheritance of the “natural objects” of the signer’s bounty

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Constant association and supervision by the beneficiary, as when the signer lives with the beneficiary

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Lack of opportunity for others to visit the signer

In Ms. Stephenson’s case, said the court, there was at least some evidence on several of those elements.

Ms. Stephenson’s estate should be permitted to put on its case for undue influence, and so the case was remanded for further proceedings. Meanwhile, allegations of interference with a contract and unfair trade practices were dismissed. Stephenson v. Warren, March 7, 2000.

Arizona law is very similar to the North Carolina court’s holding. In a 1966 case the Arizona Supreme Court outlined eight factors tending to show undue influence, with much the same effect. One subtle (but important) difference: Arizona cases have expressly held since at least the mid-1940s that “advanced age” (by itself, at least) can not give rise to any presumption of undue influence.

Two years before Erwin W. Schlueter died in 1997 at age 85, he had completed his estate planning. He had signed a will, a durable power of attorney for financial matters and a durable power of attorney for health care. When his relatives contested the validity of the will, they pointed to the powers of attorney as evidence that Mr. Schlueter knew he was already incompetent to make his own financial decisions.

Mr. Schlueter and his wife Frieda had watched neighbor Chris Bowers grow up, and they were particularly fond of him. In 1994, Mr. Schlueter even named the youngster as alternate agent in his power of attorney, to take effect if Frieda should die before him. Mr. Bowers was only seventeen years old at the time.

There was no doubt that Mr. Schlueter suffered from dementia at the time he executed his powers of attorney and (later) his will. His relatives asserted that the mere fact of the dementia diagnosis should be evidence of incapacity, and that they should be permitted to make the case for invalidating his will to a jury. In addition, they argued, when Mr. Schlueter signed the immediately effective power of attorney he tacitly admitted his own incapacity even before the will was signed.

Mr. Schlueter’s doctor and the witnesses to the will all agreed that he was confused, and that his short-term memory was poor. Mr. Bowers argued that the mere fact of a dementia diagnosis was not enough to get the case before a jury, and that the family had to show more specific evidence of lack of capacity.

Mr. Schlueter’s relatives pointed to the will itself. It identified his mother as his mother-in-law, and vice versa. It also described him as the “testatrix,” which would have made Mr. Schlueter a female. In response, Mr. Bowers submitted the affidavit of the secretary who prepared the wills for the Schlueters; she explained that she had prepared Mrs. Schlueter’s will first, and then switched names to make the identical will for Mr. Schlueter, and that the failure to switch “mother” and “mother-in-law” and to change “testatrix” to “testator” were her mistakes, not Mr. Schlueter’s.

The Wyoming Supreme Court reviewed the affidavits submitted and decided that there was insufficient evidence of incapacity to even submit the matter to a jury. The mistakes in the will, said the court, “demonstrate clerical carelessness rather than incapacity,” and the mere diagnosis of dementia did not preclude a finding that Mr. Schlueter had sufficient capacity to sign his will. Finally, granting a power of attorney, even an immediately effective power, can not be construed as an admission of incapacity. Estate of Schlueter, January 11, 2000.

In 1998, Gertrude Hoener signed a bank card giving Ronald Hoener power of attorney over her accounts at People’s Bank of Pratt, Kansas. By the time she died in 1995, he had written checks to himself for $140,000 and had liquidated over $250,000 in certificates of deposit held in her name.

When she signed the bank’s signature card, Mrs. Hoener also instructed the bank to send her monthly statements in care of Mr. Hoener. That fact became critically important in the subsequent litigation. Mrs. Hoener’s daughter (and executrix) argued that the bank had failed in its duty to keep Mrs. Hoener informed of the status of her account; the bank, on the other hand, argued that it had complied with the instructions given to it by a fully competent customer, and insisted that it had no obligation to look behind the customer’s motivations.

Apparently Mrs. Hoener first learned that she was running out of money about two years before she died. At that point she considered authorizing the sale of some property to pay for her care (she was by then residing in a nursing home), but it is not clear whether she thought that Mr. Hoener was taking advantage of her. In any event, the Kansas Court of Appeals later ruled, she had a duty to investigate the status of her affairs at that point, and her daughter could not make the claim on behalf of her estate years later.

After Mrs. Hoener’s death, her daughter brought suit against the bank for its alleged involvement in the dissipation of Mrs. Hoener’s estate. When the bank insisted its only obligation was to deliver statements to its customers, Mrs. Hoener’s daughter argued that bank employees had actual knowledge of the alleged financial exploitation, and therefore should have taken extra steps. The trial court disagreed, and granted the bank’s motion to dismiss the lawsuit.

On appeal, the Kansas Court of Appeals agreed that dismissal was proper. The appellate judges noted that the bank’s only duty was to send statements to the address directed by its customer, and that if there was any additional duty it was too late to bring the lawsuit more than two years after Mrs. Hoener herself should have realized something was amiss. Henrichs v. Hoener, Sept. 29, 1999.

In Arizona, the result likely would have been the same. Arizona law does require tax preparers and others to report financial exploitation of vulnerable adults, but the language is not broad enough to include bank officials. Like Kansas, Arizona requires a bank customer to make any complaint about handling of an account within a short period of time after statements have been mailed. Even if there was evidence the bank was aware of mismanagement, any lawsuit would have to be filed within that time.